Business

American Apparel warns about mounting debts and losses

American Apparel store
Image caption American Apparel has seen its sales fall in the past year

The US clothing chain American Apparel has warned it might not be able to continue because of debts and trading losses.

The Los Angeles based retailer said its debts had risen to $120.3m (£77.2m).

The firm said there was "substantial doubt that the company will be able to continue as a going concern".

Its share price fell 15% on Tuesday morning. The shares had already lost 55% of their value since the beginning of the year.

American Apparel, which has more than 280 stores worldwide, and 14 in the UK, warned of losses of up to $7m (£4.5m) for the three months to June.

Continuing losses

The company says it expects its losses to continue throughout the third quarter of this year.

The firm has also said it was likely to breach the terms of its agreement with its main lender, the private equity firm, Lion Capital.

The company, which is known for its t-shirts and low-budget advertising style, has been involved in several controversies.

Last year, US immigration inspectors ordered it to dismiss some 1,500 workers in Los Angeles because they did not have work documents.

The company's auditors Deloitte resigned in July. A newly appointed auditor Marcum is completing a review of the accounts.

The firm employs around 10,000 people.

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